MARKET PERSPECTIVE
By J Mulraj
Aug 1 – 8, 2025
Or imitative of Pinocchio?
Image created by Bing
Donald Trump is on a rampage, raising import tariffs for all countries, to ludicrous levels, on the specious argument that they had been ripping the US off, over the years. It seems rather inconceivable that, had the US been continually ripped off, it ranks, today, #1 by GDP and #7 by per capita income. US trade deficits are the result of American consumer greed, in spending more than they earn, and not due to others ‘ripping ‘ them off. That’s a prevarication. If it had been Pinocchio who had said that, his nose would have elongated.
Trump then went on to unilaterally announce trade deals with the likes of Japan and the EU, on terms which are unilaterally favourable to America, making them resemble shake downs, rather than deals. The Japan deal, announced in late July, fixed the import tariff for automobile and auto parts exports to USA at 15%, (down from the threatened 25-27.5%).
However, tariffs on Japanese steel, aluminium, and, perhaps, semiconductors, remain at a staggering 50%. In addition, Trump announced that Japan would be investing $550 b. in USA, in sectors like semiconductors, energy infrastructure, shipbuilding, pharma and others and that, get this, the US would be entitled to 90% of the profits from these investments!
Now, is that a deal or a shakedown?
Interestingly, all trade deals are subject to being approved by the legislative bodies of both countries. It’s hard to imagine the Japanese legislature, aka Diet, to approve investing $550 m in another country only to get 10% of the profit! That would be an unhealthy diet.
Similarly, the deal with the President of the EU, Ursula von der Leyen, (not to be confused with Alice in Wonderland), was also one sided, in favour of USA. Tariffs on most items exported by EU like automobiles, auto parts, pharma, semiconductors will be at 15%, but all items exported by USA to the EU would be duty free.
Exports of steel, aluminium and copper from EU to USA will attract a 50% duty!
The EU will purchase $750 b. energy products from USA, over time, and will invest $ 600 b. in USA.
Now, is that a deal or a shakedown?
Less than 24 hours after Trump’s announcement of his version of the trade deal with EU, the largest ever deal, he said, the EU President refuted it.
She said that tariffs on US auto imports would be 15%, not 0. That the proposal to invest $600 b. was just that; only a proposal and not a commitment. And that, as stated above, all trade deals would need to be approved by the Parliaments of all EU countries.
So, were these deals truly ‘done’ deals?
As regards a trade deal with India, the Government of India drew a red line on opening up the Indian agriculture and dairy markets to American products. Half of India’s population is dependent on farm income for their livelihood. That would be more than double the entire US population. With so many farmers, the average size of the Indian farm is too small, and the average income of a farmer too low, to lend itself to mechanised farming. Ergo, crop yields are too low, and the Indian farmer cannot compete with an American one. Anyone with empathy and common sense can see that.
This red line on farm and dairy access angered Trump, and he levied a 25% tariff on Indian exports to USA, plus another 25% for buying oil from Russia, and so helping prolong the war!
Had Pinocchio said this, his elongated nose would have needed rhinoplasty!
It was, verily, the US who prodded Russia to invade Ukraine. It did this by two actions 1. Encouraging NATO to consider granting membership to Ukraine and 2. Pressuring Germany and other EU countries to stop buying Russian energy, the cheapest and cleanest energy supplied via the Nordstream pipeline.
When President Gorbachev of Russia agreed to German reunification, and to a balkanisation of the Soviet Union by granting freedom to several regions (birthing Poland, Hungary, Czechoslovakia and others, it was conditional upon a promise by NATO not to expand eastwards. US, under President Reagan, and NATO, agreed to that condition. They did not keep their promise, but expanded Eastwards in successive waves. Since NATO, under it’s charter, can place it’s weapons in any member state, the closer it got to the Russian border, the more alarming it became for Russia. The time to intercept incoming missiles grew shorter.
So the prospect of NATO membership for Ukraine, a contiguous neighbour, was a red line for Russia. Putin publicly said so on 4 occasions, announcing his intention to invade if the collective west persisted in it’s folly to advance Eastwards, breaking it’s promise. US President Biden, suffering dementia, ignored the warnings, thus prodding Russia to enter Ukraine in a war that need never have happened.
After provoking Russia to invade, the US President, Joe Biden, despatched British PM, Boris Johnson to scuttle a cease fire agreement both Ukraine and Russia willingly made, shortly after Russia entered Ukraine. What business was it of Boris Johnson? He scuttled it by promising US/NATO financial and military support to Ukraine. So Biden, leader of USA and his puppy dog Boris, of UK, are jointly responsible for the subsequent deaths, injuries and destruction.
It is USA which is responsible for funding the war, and prolonging it with military equipment. Not India, which is buying Russian energy. Incidentally, the EU has bought more Russian energy (natural gas) than India has Russian oil. Here, too, the duplicity of America and of Trump, is astounding. A query on Chat GPT about global crude oil production and consumption shows both to be completely in balance. Production at 102.6 million barrels per day (bpd) and consumption between 101.8-103 million bpd. Of this Russia supplies 10.5 million bpd, a little over 10%. So if this supply is not bought by anyone, under pressure of sanction, then consumption would exceed production by 10.5 million bpd. The price of Brent crude would shoot up from the current level of $66/ barrel to….who knows? maybe $ 200?
Inflation would rage, followed by prolonged high interest rates to try and curb it.
In a further twist, Putin has threatened to halt supply of oil passing through the Caspian Pipeline Consortium (CPC) pipeline if India is threatened with higher tariffs for buying it’s oil. This pipeline reaches the Russian port of Novorossisyk from where 1.3 million bpd is exported to Chevron, Exxon, Shell and others. Now that Trump has raised tariff to 50% let’s see if Putin carries out the threat.
Trump has done the unthinkable by sending two Ohio class submarines near Russian borders. Each Ohio class submarine carries 20 Trident DII 5 submarine launched missiles with multiple times the destructive power of the atomic bomb that finished Hiroshima. Unthinkable because these missiles have a range of 7000 miles, so there is no need to position them close to a country’s border except to provoke it.
But Russia cannot be provoked. It has equally destructive conventional and nuclear firepower of it’s own. So why is Trump pushing the doomsday clock closer to midnight?
The truth is that the US has destroyed the EU, by asking it to stop buying cheap Russian energy, then allegedly going on to blow up the Nord Stream Pipeline. This forced EU to scurry for alternative energy sources, principally American LNG, at a multiple the cost of Russian gas. Then NATO pressured the EU to increase it’s defence spending, at the cost of infrastructure and social programs. And now EU is buying American defence equipment to gift to Ukraine. In his election campaign, Trump had vowed to stop the Ukraine war in 24 hours.
Well, Mr Trump, it’s been 199 days since you became Prez. Haven’t you lost trust? Had Pinocchio made false claim, his elongated nose would have easily won any race.
Last week the BSE Sensex closed at 79857, with a minor loss. It was flat over the week, around 80000.
In the coming week/s Putin and Trump are to meet. Hopefully Trump will be able to deliver a ceasefire, albeit 200 days late. If he does, he may then have time to work on settling the Israel-Palestine conflict which is ravaging the Middle East (another hypocrisy in accusing Modi of abetting Russia, resulting in deaths when he is doing the same in the war on Gaza). After that he may even have free time to put his nose into reading Dale Carnegie’s book “How to Win Friends and Influence People”.
Because of the tariffs, India’s GDP may take a hit of around 0.5% with some sectors like gem and jewellery and garments faring badly and needing to diversify markets. Modi should take the opportunity to change the colour of the legislative tape from red to green, and make India more welcoming of foreign investors. He should also haul up the Enforcement Directorate (ED), which was established to bring economic offenders to justice. In the past 10 years the ED has filed 5892 cases but convicted only 15!
It is curious that even when both parties arrive at a settlement, (like in the case of NSEL), they need the approval of the PMLA, Prevention of Money Laundering Act to complete it? Why should they? The victims have suffered enough and have taken a haircut in the hope of getting some money back quickly. PMLA has done little to help the victims and is now rubbing salt in their wounds by asking for it’s permission to fulfil a settlement! Mr Modi, why would foreign investors, seeing this nonchalance, be willing to invest in India?
Foreign investors do not feel welcome if economic disputes aren’t swiftly handled. Does India prefer tardy bureaucrats (15/5892 cases) or does it prefer FDI inflows with technology transfer and job creation? It’s a no brainer, Mr Modi!
In the wake of never ending wars, genocide, tariff blackmail, nuclear threats, it is surprising that markets are remaining so steady. As any cardiologist will tell you, a flat line is not always a good sign!
Comments may be sent to jmulraj@asiaconverge.com
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